Asian Economic Integration Monitor

Transcription

1 Asian Economic Integration Monitor MARCH 2013

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3 Asian Economic Integration Monitor march 2013

4 2013 Asian Development Bank All rights reserved. Published in Printed in the Philippines. ISBN (Print), (PDF) Publication Stock No. RPS Cataloging-In-Publication Data Asian Development Bank. Asian Economic Integration Monitor March Mandaluyong City, Philippines: Asian Development Bank, Regionalism 2. Subregional cooperation 3. Economic development 4. Asia I. Asian Development Bank. The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. By making any designation of or reference to a particular territory or geographic area, or by using the term country in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. ADB encourages printing or copying information exclusively for personal and non commercial use with proper acknowledgment of ADB. Users are restricted from reselling, redistributing, or creating derivative works for commercial purposes without the express, written consent of ADB. Note: In this publication, $ refers to US dollars. Unless otherwise indicated, all percentage comparisons are y-o-y. Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines Tel.: Fax: For orders, please contact: Department of External Relations Fax: adbpub@adb.org Printed on recycled paper. The Asian Economic Integration Monitor (AEIM) was prepared by a team from the Office of Regional Economic Integration (OREI), under the guidance of the Vice President for Knowledge Management and Sustainable Development Bindu N. Lohani. OREI is currently headed by Chief Economist Changyong Rhee. The AEIM team was led by Ramesh Subramaniam and Lei Lei Song. Haruya Koide, Jayant Menon, Thiam Hee Ng, Takaaki Nomoto, Lei Lei Song, Myo Thant, and James Villafuerte authored individual sections. The AEIM was peerreviewed by OREI s Hans-Peter Brunner, Alisa Di Caprio, Shintaro Hamanaka, Xinglan Hu, Junkyu Lee, and Hsiao Chink Tang. ADB regional departments, the ADB Institute, and Iwan Azis also provided comments and suggestions. Mitzirose Legal, Damaris Yarcia, and consultants from the Asia Regional Integration Center led by James Villafuerte and supported by Mara Tayag contributed data, research, and analysis. Guy Sacerdoti was editor. Ariel Paelmo and Erickson Mercado produced typesetting, layout, and cover design. How to reach us: Asian Development Bank Office of Regional Economic Integration 6 ADB Avenue Mandaluyong City 1550 Metro Manila, Philippines Telephone: Facsimile: aric_info@adb.org Download AEIM at:

5 Contents Abbreviations and Acronyms.... iv Highlights... 1 Regional Economic Update... 3 External Economic Environment....3 Regional Economic Outlook...4 Risks to the Outlook and Policy Issues...7 Progress in Regional Cooperation and Integration Introduction....9 Trade Integration Financial Integration Macroeconomic Interdependence Labor Mobility Infrastructure Connectivity Provision of Regional Public Goods Macroeconomic and Financial Cooperation Multilateralizing Asian Regionalism: Approaches to Unraveling the Asian Noodle Bowl Introduction FTAs in Asia: the State of Play The Doha Development Agenda: Compromise or Coma? Consolidation Multilateralization of Preferences Interim Steps to Multilateralization: Harmonized Reduction of MFN Tariffs and Dilution of Rules of Origin Comparing the Relative Merits of Consolidation, Multilateralization, and the Interim Steps to Multilateralization Concluding Remarks References Boxes 1. An Asian Economic Integration Monitor Roadmap Trading Goods and Services What you can hold, and What you cannot Statistics on Services Trade Balance of Payments Manuals 5 and Services Trade in India and the Philippines Using Vector Autoregression Models to Identify the Origination of Shocks Risk Sharing in Asia Improved Regional ICT Connectivity in the Pacific ASEAN s Response to Transboundary Haze Contents July 2012 iii

6 Abbreviations and Acronyms ADB ADBI AEIM AFC AFTA APEC ARIC ASEAN ASEAN+3 ASEAN-4 ASEAN+6 BIMP-EAGA BoJ BoK BPM BPO BSA CAREC CIS CMIM CROP DDA DMC EMEAP EU EU-6 EWEC FAL FDI FSM FTA FY GDP GFC GMS G3 G7 G20 Asian Development Bank Asian Development Bank Institute Asian Economic Integration Monitor 1997/98 Asian financial crisis ASEAN Free Trade Area Asia Pacific Economic Cooperation Asia Regional Integration Center Association of Southeast Asian Nations ASEAN plus the People s Republic of China, Japan, and the Republic of Korea Indonesia, Malaysia, the Philippines, and Thailand ASEAN plus Australia, the People s Republic of China, India, Japan, the Republic of Korea, and New Zealand Brunei Darussalam Indonesia Malaysia Philippines East ASEAN Growth Area Bank of Japan The Bank of Korea Balance of Payments Manual business process outsourcing Bilateral Swap Arrangement Central Asia Regional Economic Cooperation computer and information services Chiang Mai Initiative Multilateralisation Council of Regional Organisations of the Pacific Doha Development Agenda developing member country Executives Meeting of East Asia Pacific Central Banks European Union France, Germany, Italy, the Netherlands, Spain, and the United Kingdom East West Economic Corridor Convention on Facilitation of International Maritime Traffic foreign direct investment Federated States of Micronesia free trade agreement fiscal year gross domestic product 2008/09 global financial crisis Greater Mekong Subregion Group of Three (eurozone, Japan, and the United States) Group of Seven (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) Group of Twenty (Argentina, Australia, Brazil, Canada, the People s Republic of China, France, Germany, India, Indonesia, Italy, Japan, the Republic of Korea, Mexico, Russian Federation, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and European Union) HQLA ICT IMF IMT-GT IATA ISPS Code Lao PDR LCR LPI LHS MFN MoPs NAFTA NTBs/ NTMs OFW OREI OWWA PBOC PECs PMI PNG PRC q-o-q RBI RCEP RCI RHS ROOs saar SAARC SAFTA SASEC SCS SEACEN SOLAS SEC TCIS TLP TPP UN UNESCAP VAR US WTO y-o-y high quality liquid assets information and communication technology International Monetary Fund Indonesia Malaysia Thailand Growth Triangle International Air Transport Association International Ship and Port Facility Security Code Lao People s Democratic Republic liquidity coverage ratio Logistics Performance Index left-hand scale most favored nation margins of preference North American Free Trade Agreement non-tariff barriers or measures overseas Filipino workers Office of Regional Economic Integration Overseas Workers Welfare Administration People s Bank of China Pan-European Cumulation System purchasing managers index Papua New Guinea People s Republic of China quarter-on-quarter Reserve Bank of India Regional Comprehensive Economic Partnership regional cooperation and integration right-hand scale rules of origin seasonally adjusted annualized rate South Asian Association for Regional Cooperation South Asian Free Trade Area South Asia Subregional Economic Cooperation submarine cable system South East Asian Central Banks Safety of Life at Sea Southern Economic Corridor telecommunication, computer and information services Trade Liberalization Programme Trans-Pacific Partnership United Nations United Nations Economic and Social Commission for Asia and the Pacific vector autoregression United States World Trade Organization year-on-year iv March 2013 Asian Economic Integration Monitor

7 Highlights Regional Economic Update Despite a still weak external environment, most of developing Asia will likely see their economies improve on increased domestic demand and a modest recovery in export growth; GDP is forecast to rise 6.6% in 2013 from 6.0% last year. The economic outlook for developing Asia is subject to three major risks: (i) an economic slowdown in the US from missed fiscal deadlines; (ii) a worsening eurozone debt crisis; and (iii) destabilizing capital flows. Given the evolving global economic landscape, developing Asia s policymakers should not let shortterm adjustments interfere with the longer-term goal of a more balanced, sustainable, inclusive, and integrated economy. Progress in Regional Cooperation and Integration Regional integration progressed as the 2008/09 global financial and eurozone debt crises brought greater cooperation to Asia; yet, deepening cooperation will likely be more challenging. As advanced economies are readjusting, Asia continues to deepen initiatives and explore new ways to enhance regional cooperation, collaboration and coordination. Despite a shift in direction of Asia s exports, the share of intraregional exports has remained unchanged at around 56% in Trade in services is increasingly important to Asia, though its growth remains below trade in goods; Asia should prioritize service exports as a new growth channel particularly modern services. The 2008/09 global financial crisis accelerated financial integration, with intraregional asset holdings rising and Asian investors increasing bond purchases from the People s Republic of China (PRC) and Japan. Since 2008, Asia s equity returns have converged in response to global shocks; co-movements in bond yields, however, have not changed much since 2000, as they are mostly affected by local events. Examining the correlation between consumption and output growth in Asia shows risk sharing to be quite small, even if there has been some increase over time. Intraregional remittances within Asia are rising rapidly, indicating growing intraregional labor mobility; as intra-asian migration grows, better management to avoid conflict is an essential challenge to future cooperation. While regional connectivity is improving, demand continues to rise faster than supply, widening the infrastructure gap. As tariffs decline globally, transport and trade transaction costs, along with other non-tariff barriers, are becoming more important; cross-border procedures need to be simplified, harmonized, and use international best practices. Increasing interdependence underlines the importance of regional public goods in addressing both global and regional issues such as climate change and the environment, epidemics, disaster preparedness, good governance, and cross-border crime. Financing and the delivery of regional public goods remain challenges to regional cooperation; as do institutional design and the standards used to deliver regional public goods. Highlights March

8 Currency swap arrangements have been used widely since the 2008/09 global financial crisis and have become a major form of central bank coordination; the PRC is expanding its network of swap agreements to promote trade settlement in local currencies facilitating bilateral trade and investment and the internationalization of its currency. Special Chapter: Multilateralizing Asian Regionalism Approaches to Unraveling the Asian Noodle Bowl The proliferation of free trade agreements (FTAs) has been greatest in Asia; the global multilateral impasse has helped create an Asian noodle bowl, with more than 100 ratified FTAs involving at least one Asian economy. The ASEAN-led Regional Comprehensive Economic Partnership could pave the way for consolidating ASEAN FTAs under a single regional agreement, although it is still too early to tell. Multilateralization can proceed from a consolidated regional FTA, or economies can seek multilateralization independently; but they both must overcome competing interests that lose from the dilution of preferences. Although consolidation and multilateralization are not mutually exclusive consolidation is a means; multilateralization is the end history shows that unilateral actions (of which multilateralization is a special case) are not only feasible but account for most trade liberalization to date. Two key proposals have been advanced to disentangle the Asian noodle bowl: consolidation which creates a regional FTA to harmonize bilateral FTAs; and multilateralization which grants nondiscriminatory preferences to nonmembers, eliminating preference discrepancies. 2 March 2013 Asian Economic Integration Monitor

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10 Asian Economic Integration Monitor March 2013 The Asian Economic Integration Monitor is a semiannual review of Asia s regional economic cooperation and integration. It covers the 48 regional members of the Asian Development Bank. This issue includes a special chapter Multilateralizing Asian Regionalism: Approaches to Unraveling the Asian Noodle Bowl. About the Asian Development Bank ADB s vision is an Asia and Pacific region free of poverty. Its mission is to help its developing member countries reduce poverty and improve the quality of life of their people. Despite the region s many successes, it remains home to two-thirds of the world s poor: 1.7 billion people who live on less than $2 a day, with 903 million struggling on less than $1.25 a day. ADB is committed to reducing poverty through inclusive economic growth, environmentally sustainable growth, and regional integration. Based in Manila, ADB is owned by 67 members, including 48 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines Printed on recycled paper Printed in the Philippines